Question

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer. This item would require an adjusting entry including a:________.
a. debit to Cash.b. debit to Accounts Payable.c. credit to Accounts Payable.d. debit to Accounts Receivable.

Answer 1

Answer:

Correct answer is C, credit to accounts payable

Explanation:

Debit memo for NSF check means, the company issued checks as settlement to a supplier yet the bank account of the company on which the check has issued have insufficient fund to cover the drawn amount. Ineffect, the settlement is yet to fullfil and the company's obligation is still enforceable. The company must recognize the existing liability by crediting accounts payable because it is still payable and unsettled on the suppliers as an effect of failure to draw the payment on previously issued checks.